How to Claim the Section 179 Deduction for a Car

The Section 179 deduction allows businesses to expense the cost of qualifying equipment in the year of purchase rather than depreciating it over several years. This tax provision can apply to vehicles used for business activities, offering a way to lower taxable income. Understanding how to apply this deduction to a car purchase involves specific rules regarding the vehicle’s use, its physical characteristics, and established dollar limits.

Vehicle Qualification Requirements

A vehicle must meet two conditions to qualify for the Section 179 deduction. The first is that the vehicle must be used for business purposes more than 50% of the time. This percentage is determined by tracking the miles driven for business versus total miles driven in the tax year. Business use includes travel between two different business locations, visiting clients, or running business-related errands, while commuting from home to a primary workplace is considered personal use.

To substantiate business use, maintaining a detailed mileage log is required. This log should document the date, mileage, and purpose of each business trip. At the end of the year, the total business miles are divided by the total miles driven to calculate the business-use percentage, and the deduction amount will be proportional to this percentage.

The second condition is the “placed in service” rule. This means the vehicle must be purchased and actively available for its intended business function during the tax year for which the deduction is claimed. Simply buying the vehicle is not enough; it must be ready and available for use in the business’s income-producing activities. For example, a delivery van purchased in December is considered placed in service as long as it was ready for making deliveries before the end of the year, even if no deliveries were made.

Deduction Limits for Different Vehicle Types

The amount of the Section 179 deduction a business can claim depends on the type of vehicle purchased. The Internal Revenue Code creates a distinction based on a vehicle’s Gross Vehicle Weight Rating (GVWR), which is the maximum operating weight of a vehicle as specified by the manufacturer. This rating can be found on a sticker inside the driver’s side door jamb.

Heavy Vehicles

Vehicles with a GVWR over 6,000 pounds are categorized as “heavy” and are eligible for larger Section 179 deductions. This category includes many heavy SUVs, full-size pickup trucks, and cargo vans. For certain heavy vehicles, such as cargo vans without rear passenger seating or trucks with a cargo bed of at least six feet, a business may be able to deduct up to the full purchase price, subject to the overall Section 179 annual limit, which is $1,250,000 for 2025.

A specific limitation applies to heavy SUVs. For sport utility vehicles with a GVWR between 6,001 and 14,000 pounds, the Section 179 deduction is capped at a specific dollar amount. For 2025, this limit is $31,300, which is the maximum amount that can be expensed under Section 179 for such a vehicle. The remaining cost may be depreciated using other methods.

Passenger Automobiles

Passenger automobiles, which include most cars, light trucks, and vans with a GVWR of 6,000 pounds or less, are subject to lower deduction limits. The IRS imposes annual depreciation limits on these vehicles. For these lighter vehicles, the maximum first-year Section 179 deduction is less than for heavy vehicles.

For passenger automobiles placed in service in 2025, the maximum first-year depreciation limit is $12,200. If a business also claims bonus depreciation, which is set at a rate of 40% for 2025, the combined maximum first-year deduction is $20,200. These figures are indexed for inflation and can change annually.

Information Needed to Claim the Deduction

To claim the Section 179 deduction for a vehicle, a business must gather specific information and report it on IRS Form 4562, Depreciation and Amortization. This form is where the election to expense the vehicle is formally made and calculated.

Before filling out the form, several pieces of data must be compiled. This includes the vehicle’s total cost, the date it was placed in service, and its GVWR to determine which deduction limit applies. The calculated business-use percentage is also required, as this figure directly impacts the deductible amount.

All of this information will be entered in Part I of Form 4562. The form requires the taxpayer to describe the property being expensed and its cost, and then calculate the elected deduction. The calculation also applies the business income limitation, which prevents the deduction from creating a net business loss.

How to Claim the Deduction

After completing Form 4562, it must be filed with the business’s annual tax return. The form is attached to the main tax return for the business entity, making the deduction part of the overall tax filing.

The primary form used depends on the business structure. A sole proprietor or single-member LLC attaches Form 4562 to their Schedule C (Form 1040), “Profit or Loss from Business.” A partnership attaches the form to Form 1065, and a corporation attaches it to Form 1120.

The total Section 179 deduction calculated on Form 4562 is then carried over and entered on the corresponding line for deductions on the main business return. The deduction directly reduces the net profit of the business, thereby lowering the overall tax liability for the year.